Warner Bros. Strikes a Blow Against Netflix

It’s been my opinion for a while now that all-you-can-eat subscription services like Netflix are going to be a temporary thing with a limited window of success. Back when movie streaming was a minor thing aimed at a niche, tech savvy audience, it probably made sense for studios to sign deals with Netflix giving them access to their film libraries. Even five years ago high speed Internet wasn’t so ubiquitous, and if you wanted to stream something over the Internet, that pretty much meant you were streaming it to your computer monitor. But in today’s world of omnipresent wifi and apps that allow everyone to stream movies to smart TVs, video game consoles, app-enabled Blu-ray players, smart phones, and tablet computers, the entire game has changed.

Now people can stream movies wherever they are, whenever they want. And they do… a lot. I think we’ve all seen that statistic floating around that 1/3 of all Internet traffic in the evenings comes from people streaming movies through Netflix. While I’m not in any position to prove that such a statistic is true, let’s just assume that it’s mostly true; that accounts for a huge amount of movie watching that ten years ago was being done through the more profitable to studios vehicle of DVD purchases and rentals.

Recent looks at the film industry’s health have shown that the only two places where the industry is seeing any growth are in the sale of high definition Blu-ray discs and in video on demand streaming. With the entire home video market ditching DVDs and becoming streaming right before our eyes, it’s long past time that the studios start taking steps to regain a bigger piece of the pie. That means killing streaming services like Netflix, where they’re paid pennies every time a movie they own gets watched, and promoting pay-per-view video on demand services that generate more income; which means we’re about to enter a period of open hostility between Netflix and the people who produce the content they’re reliant on for subscribers.

The first shots in that war may have very well just gotten fired. A report from Deadline Reseda says that, at this year’s CES, Warner Bros. has announced that the window between when a movie gets released on DVD and when Netflix can begin offering it to its subscribers has just been doubled from 28 days to 56. Warner Home Video North America president Mark Horak said, “Since we implemented a 28 day window for subscription and kiosk, we have seen very positive results with regard to our sell-through business. One of the key initiatives for Warner Bros. is to improve the value of ownership for the consumer and the extension of the rental window — along with our support of UltraViolet — is an important piece of that strategy.”

What is UltraViolet?

It’s a service created through a partnership of most of the big studios and retailers that allows a person who purchases a film in any format the legal rights to stream it on pretty much any of their various electronic doodads. Training consumers to stream their content this way rather than through Netflix is going to be an essential step the studios will have to take if they want to keep making enough money to produce the big budget spectacles that audiences have come to expect from Hollywood. Warner Bros. trying to keep their DVDs out of Netflix’s hands is the first step, the next will be to wait and see if other studios follow suit. And perhaps after that we’ll start seeing studios letting their rights deals with Netflix lapse altogether, so that the only place consumers can acquire their movies will be in their own video on demand services where the studios see the bulk of the profits. If that comes to pass, then it will surely mean doom for the company famous for their little red envelopes. Whichever way the wind blows, the next five years are guaranteed to be both volatile and interesting for the home video market.

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